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| Rep. David McSweeney |
A “Fair Tax”
Amendment: Republicans Warn Exodus!
When I last sat
down and crunched numbers for the impact of a possible amendment in Illinois to
call for a graduated tax system (design to be determined after passage by the
General Assembly), my initial findings were of significant relief for those
making the least and lesser relief for those working families in Illinois
earning more than the median annual wage.
In fact, the break-even point seemed to occur somewhere just before $122,000.
My anticipated savings
were based upon a promotional endorsement of the two bills (SJRCA 40 &
HJRCA 33) by A Better Illinois, in which the organization offered a modest
model from another state.
Shortly
thereafter, I received a bulletin from Representative David McSweeney (R - 52nd
District) that warned “families with
incomes above $7,000 will see increases in taxes in 2015 (if a graduated
tax is implemented).
Yikes! Above $7000?
Obviously clueless crunching on my part?
I decided to ask
the Representative how he got those numbers.
I’ve read your numbers with some
concern…“I ’d like to understand the dangers a graduated tax system would
present the middle class in Illinois; would you flesh out some of these numbers
for me?”
Representative
McSweeney replied again: “I
am against the graduated income tax primarily because higher tax rates are
known to be job-destroying and punish families and small businesses.
Approximately 75% of all businesses, and a much higher proportion of
small businesses, file income taxes on an individual basis. The tax
increase would be damaging to the entities that create the most new jobs.”
I
toyed with the idea of asking once again to have the Representative provide
some substantiation for these numbers. I
thought “flesh” out was colloquially enough to get an answer, not another
talking point.
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But,
if I did ask for some clarity, I knew I might get more of these knee-jerk
phrases: Loss of jobs, we’ll lose our business-friendly standing more, destroys
initiative and desire for success, would hurt the lower classes even more, or
might even add to an already rampant democratic corruption, businesses will run away …
Looking
at New Jersey some ten years ago, might give us some answers as to what
actually happens after a decade of increased tax implementation. And it was a perfect storm, one where New
York’s expiring tax increases were juxtaposed with New Jersey’s sudden
increase.
“In a new law
approved on June 28, 2004, New Jersey increased its top income tax rate for tax
years beginning on and after January 1, 2004, from 6.37% on the portion of
taxable income above $75,000 for single individuals and $150,000 for married
couples to 8.97% on the portion of taxable income above $500,000 regardless of
filing status. This represents a significant shift in the traditional
relationship between the top income tax rates in New York and New
Jersey. For the first time in history, the top New Jersey rates are now
substantially higher than the top New York rates. New York State’s temporary
top rate of 7.7% on taxpayers with taxable incomes of $500,000 or more is
schedule expired on December 31, 2005. New York’s current top income tax
rate is 6.85% for married taxpayers with taxable incomes above $40,000 and
single taxpayers with incomes above $20,000. The 6.85% top rate is more
than 55% lower than the state’s top income tax rate in 1974.
Republican
economists and conservative think-tanks denounced the expected population
shifts of wealthy from New Jersey to New York, the dreaded loss of businesses
to the neighboring state, the unfair burden on those who earned more: sound
familiar?
And,
they warned, those with money and ability can and will move away if they feel
threatened…and any taxes menace competition and profit…
But
careful long-term studies of the cumulative effects of increased taxes in the
New Jersey/New York scenario, point to a much different outcome. “Researchers from Princeton and Stanford
universities looked carefully at the data and found that migration from New
Jersey that might be attributable to the tax increase reduced the estimated
revenue gain from the tax increase by a negligible 0.4% (In other words, there was still a very
substantial net revenue gain.)”
On
the other hand, according to Robert Frank in the Wall Street Journal, the
increased tax rates had “no measureable impact”; in fact, the only group of
wealthy who made any movement were those not working and living off of
investments. In Illinois, interestingly,
a group that does not participate in state income taxes to begin with. (http://blogs.wsj.com/wealth/2011/04/20/millionaire-tax-didnt-chase-the-rich-from-new-jersey-study-says/)
What
might be real drivers of an economy like one in Illinois, where we all labor
under an archaic income tax system developed in the last mid-century?
According
to the Center on Budget and Policy Priorities, mainstream economists agree on
the following factors in economic growth for a state:
·
A
high quality education system that produces a well-educated workforce
·
An
up-to-date infrastructure, including roads, bridges and public transportation
systems
·
Reliable
police services and fire protection
·
Services
that support workers, like health care and job training
·
Good
quality of life (good schools, safe communities, access to cultural and
recreational amenities).
And,
according to a building number of citizens in Illinois, a graduated and fairer
tax system.
Sign
the petition:
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